London shares lower midday; Vodafone plummets; Wall Street seen falling

LONDON (Thomson Financial) - UK blue chips were lower at midday, with telecoms giant Vodafone and Enterprise Inns major casualties after releasing disappointing numbers and Wall Street set to open lower.

At 11:56 a.m., the FTSE 100 index was off 101.3 points at 5,303.0, near the session low of 5,301.7. The FTSE 250 index was down 183.4 points at 8,862.1. In the United States, Wall Street is expected to open lower, pulled down by results from Apple and American Express announced after the closing bell on Monday. The Dow Jones Industrial Average will open about 110 points lower at 11,357, according to spread betting firm IG Index. In London, index heavyweight Vodafone was still the standout loser, down 22.05 pence, or 14.8 percent, at 127.2 pence, after the mobile operator said it now sees full-year revenue at the bottom of its outlook range based on economic weakness and lower-than-expected equipment revenue.

Collins Stewart downgraded the shares to 'hold' from 'buy'. The broker said it would expect the whole sector to trade down on the back of Vodafone's numbers.

"Vodafone has kicked off the telco results season with a reminder that nothing is immune," the broker said. Chris Hossain, of Blue Index, said: "We're fairly negative. Vodafone and Enterprise have really pulled down the market, and there doesn't seem to be anything that would help it go back up." Other shares to suffer included phone retailer Carphone Warehouse, down 13.95 at 187.8, and BT Group, down 8.45 at 196.8. Banks were also weak after disappointing news from American Express late on Monday. The company said its second-quarter profit tumbled 38 percent, well below Wall Street's forecast, because consumer spending slowed and credit indicators deteriorated beyond the lender's expectations.

This morning, banks were giving back some of the gains they enjoyed on Monday on Bank of America's better-than-expected results. Barclays was down 16-1/2 pence at 307-1/2, Lloyds TSB shed 15 pence to 310-3/4, Royal Bank of Scotland dropped 10.4 to 192.6 and HBOS fell 6 to 258-1/2, having fallen on Monday amid overhang concerns following the poor take-up for its rights issue.

Back with earnings news, Enterprise Inns shed 46-3/4 pence at 299. The pubs group said continuing declines in on-trade beer volumes and greater financial support for licensees are putting pressure on group EBITDA.

Landsbanki said the update lacks any numbers, noting while the group highlights on-going declines in beer volumes, it has not quantified the decline. The broker kept its 'hold' recommendation on the stock. Wolseley fell 240 to 314 after a report in the Finanical Times said the plumbing and building materials distributor has followed up last week's profit warning with management cuts as it struggles to stay within its banking covenants.

Big fuel users lost out in the wake of oil price gains on Monday as tropical storm Dolly churned over the Gulf of Mexico, threatening to become a hurricane in the next 24 hours when it reaches the Mexico-Texas border, with Carnival slipping 63 pence to 1,662 and British Airways falling 7-1/4 to 231-3/4. Conversely, oil companies gained, with Cairn Energy, up 207 at 2,790, still topping the leaderboard. Tullow Oil added 24 to 797-1/2, Royal Dutch Shell rose 36 pence to 1,867 and index heavyweight BP was up 16 pence at 537-1/2. Brent gave up earlier gains and was was trading at $132.67 per barrel late morning, as worries about Dolly's effects subsided. Prices were still being propped up by the weak dollar, which has also boosted metals prices. Miners to gain included Lonmin, up 23 at 2,554, BHP Billiton, taking on 26 pence to 1,672, Rio Tinto, up 33 pence at 5,253, and Xstrata, also boosted by an upgrade to 'buy' from 'hold' at RBS, up 34 pence at 3,564. An upbeat trading statement provided the impetus for Johnson Matthey, up 54 at 1,722. The specialty chemicals and precious metals group said it has made a "strong start" to the new financial year, with first-quarter revenues up 33 percent and pretax profit before exceptionals up 22 percent year on year.

Also gaining in the wake of a trading update was Severn Trent, adding 53 pence to 1,400. The Midlands water utility said overall trading is in line with expectations but it believes a decline in consumption across its measured income base would cut revenues by between 12 million pounds and 14 million pounds in 2008/9.

On the second tier, Punch Taverns was down 25-1/4 at 240, in sympathy with Enterprise Inns. Similarly, Mitchells & Butler was down 19-1/4 at 238-1/2, despite Kaupthing upgrading it 'buy' from 'fair value'.

Kaupthing, which cut M&B's target price to 292 pence, from 311, said it preferred the sector's bigger companies, with less leveraged balance sheets.

With this in mind, the broker downgraded JD Wetherspoon and Greene King to 'fair value' from 'buy', cutting targets to 222 from 369 and 567 from 741, respectively. JD Wetherspoon shares were down 11-1/4 at 225 and Greene King fell 30 to 495.

Oil-related shares packed out the leaderboard, including Soco International, up 74 at 1,421.

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